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How You Can Avoid Contractor Fraud After A Home Disaster
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Article 1 of 9 in Home Insurance and Disasters
Homeowners suffering damage from natural disasters can be unfortunate targets of home repair scams and contractor fraud, which are designed to steal money by offering shoddy or incomplete repairs. Even contractors who complete the job are known to drastically increase prices to prey on desperate homeowners. If you find yourself in a major disaster, follow some of the tips outlined below to make sure you do not succumb to home repair scams that can not only drain your bank account, but cause problems with your home insurance company.
Disaster and Contractor Fraud
After a home disaster, contractors are in great demand, and it is expected that prices will go up. This type of environment makes contractor fraud very attractive. In order to protect yourself, keep a few simple tips in mind:
- Make sure your contractor is not charging exorbitant prices, and always get two or three estimates. It is sometimes hard to secure a contractor for an estimate during times of high demand, but getting more than one estimate will give a reference point to the insurance company, which may accuse your contractor of price gouging if the price seems too high.
- Avoid hiring someone out of the phone book. Get a referral, if at all possible, from someone that has had the same work done. A good reference speaks volumes because you know the contractor has done good work for someone else and therefore has a good track record.
- Most states have licensing requirements for work over a certain dollar limit. If you have a mortgage on your home, the lender will hold you to these state requirements. Make sure your contractor is licensed and insured to avoid contractor fraud. Go to your state's licensing board that licenses contractors (most can be found on the web) and make sure the license is still enforced.
- Once you get a licensed contractor you feel you can trust, check the better business bureau for their track record. Hiring a reputable person is the best way to avoid contractor fraud.
TIP: The licensing board can also be a great advocate if you find yourself in a dispute with a licensed contractor. If you hire a contractor that is unlicensed, you are on your own.
Home Insurance Fraud and Public Adjusters
Public adjusters (PA's) are independent adjusters that work for companies other than insurance companies. They assist people in working through their claims with the insurance companies by reporting the claim, assessing the damage, writing up estimates and also coordinating the contractors. Their fee is usually 10-15% of the total claim. You are responsible for paying the PA. There have been instances where contractors and PA's work together in order to work home repair scams, inflating the price of the insurance claim and giving each other kick backs once the claim is paid. To avoid this, do the following:
- Be leery of any PAthat asks for money up front. They should only be paid after the claim is paid.
- Make sure your PA is licensed in your state.
- Also check out his or her company with the Better Business Bureau.
- Do not sign any contract with a PA that you do not understand. If necessary have your contract reviewed by an attorney.
Many states have enacted laws that make PA's show proof of licenses to prospective customers, prohibiting them from accepting advance payment, and capping their fees at 5% the insurance settlement. Although there are PA's that have helped homeowners navigate the waters of their home insurance claim, you need to be wary of fraud before you trust one.
Unfortunately, many people take advantage of times like disasters to commit contractor fraud and home repair scams on desperate homeowners. In addition to lost money, you face the possibility of insurance claim denial or accusations of insurance fraud when you are taken advantage of by fraudulent contractors. Your insurance company will evaluate the facts of each claim, and, even if you have been taken advantage of, the situation may look suspicious to a home insurance provider. If you have been the victim of contractor fraud and are having difficulty with your home insurance company, click here to find an attorney who can assist your case.